Don't Look Now, Here Comes Inflation...

A headline on the BBC today read: World food prices at fresh high, says UN

This can’t be so. After all, if our Expert Central Bankers are fighting deflation, how can inflation be a problem? (For those of you who do not know me too well, I am being sarcastic.)

I love that the UN attributes the problems to the weather and that the BBC perpetuates this notion. The truth is all famines are political.

So what are we really seeing? When Central Banks print money, the first to be hurt are always the world’s poorest. Inflation starts at the bottom and works it’s way up. Trillions upon trillions of “new” fiat currency is working it’s way into markets thanks to our numerous “stimulus” packages. And when you have more and more money chasing resources, the resources seem more “scarce” than they really are.

Think of it this way. There are three guys stranded on an island. One has a dollar. One has a five dollar bill. One has a spare Big Mac in his back pocket he is willing to sell. How much does he sell that extra Big Mac for? Obviously, he would sell it to the guy with the five.

Now what happens if the guy with the dollar discovers he has a one hundred dollar bill he forgot about. How much does that Big Mac sell for now? Obviously, now that he can out-bid the guy with the five, that Big Mac is not going to get purchased for anything less than that.

In this example, the Big Mac didn’t change, money did. And although scarcity matters, most people do not see the role money plays. Yet, fiat currency is the key ingredient when creating inflation stew.

And a nice big batch of inflation stew has been brewing.

Today, the simpletons in the media continue to report that rising food prices are due to floods in Australia, as if there are not floods somewhere every year. Tomorrow, they will report that rising energy prices are due to restrictions in the Middle East, as if there has not been chaos there for decades.

The truth is not that complicated, but we ignore it, or worse, we buy into the “official” story.

Just remember, with what our Central Bankers have done -- and regardless of how it is presented -- inflation is coming. Let’s just hope it is not the “hyper” variety.